Adam Hauser - Director of Investor Relations Chris Homeister - Chief Executive Officer, President Kirk Geadelmann - Chief Financial Officer

Daniel Moore - CJS Securities Peter Keith - Piper Jaffray Reed Anderson - Northland Securities Peter Benedict - Robert W. Baird John Baugh - Stifel Joe Feldman - Telsey Advisory Group

Thank you, operator. Good morning to everyone on the call and welcome to the Tile Shop's first quarter earnings call.

Following our prepared remarks, the call will be opened for analysts' questions. Questions will be limited to analysts and we would appreciate if participants would limit themselves to one question with one follow-up.

As a reminder, certain statements made during the call today may constitute forward-looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Words such as, but not limited to, plan, expect, anticipate, believe, estimate, target and any other similar words may be to identify forward-looking statements.

Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the earnings press release issued today and in the Tile Shop's filings with the Securities and Exchange Commission.

The forward-looking statements made today are as of the date of this call and the company does not undertake any obligation to update these forward-looking statements. Today's presentations may also include certain non-GAAP measurements.

Please see the company's earnings release for a reconciliation of those non-GAAP financial measures also available on the Investor Relations section of our Web site at investors.tileshop.com. With that, let me now turn the call over to our Chief Executive Officer, Mr.

Chris Homeister.

Thanks, Adam. Good morning, everyone, and thank you for joining us today.

I'm here with Kirk Geadelmann, our CFO, and we appreciate you joining us this morning as we report our results from the first quarter of 2016. I will begin by emphasizing how pleased I am with the collective efforts of the entire Tile Shop team, including our store leaders, sales associates, and operational teams to deliver a truly outstanding start to 2016 due to sharp focus on building upon our key initiatives in the first quarter of the year as these initiatives led to very strong results in 2015 when we were looking to build upon that positive momentum.

Now, for some specific highlights from our first quarter. Sales for the quarter were $84.7 million surpassing our previous high for the quarterly revenue by $9 million.

$84.7 million of revenue represented growth of 16.1% versus last year, including comparable store sales growth of 13.2%. Revenue strength was broad-based across all vintages and geographies.

We continued to deliver this top line strength while also delivering a 70.5% gross margin rate for the quarter, our strongest quarterly gross margin rate in three years. Our adjusted earnings per share in the quarter was $0.14 per share, representing growth of 75%.

Adjusted EBITDA grew 31% and adjusted EBITDA and margin was 22.8% during the quarter, an improvement from the prior year of 260 basis points. We generated $21 million of free cash flow, which allowed us to pay down an additional $15 million of long-term debt.

Our ending inventory was $64.2 million, an increase of only 1% in a quarter that had 16% sales growth and 6% store growth. And finally, given our first quarter results and the overall strength of our business, we have raised our full year 2016 outlook for sales, gross margin, earnings per share, and adjusted EBITDA.

A variety of factors contributed to the significant achievements in Q1. We saw increases in traffic and average ticket across all vintages and geographies.

We continued to experience great success in increasing our sales to the pro customer segment. We continued to improve upon the quality of our customer service by investing in strong staffing levels during the first quarter.

These sales staffs were led by a group of store managers whose average tenure continues to increase. And finally, our product assortment now includes a full complement of products across all price points in every major product category.

The addition of a number of new SKUs has allowed us to better serve our customers and expand our reach to customer segments in both the very high end of the market as well as a more value conscious customer. Going deeper on our retail talent development efforts, we saw continued improvements in employee turnover and average manager tenure during the quarter, both sequentially and from the prior year period.

Both sales associate turnover and average manager tenure had meaningful improvements from the last year's first quarter. While we all feel we have more progress to make in improving our overall retail turnover, I am certainly pleased with our performance to date, and these results in overall turnover reduction and increased manager tenure certainly had a strong impact on the results we were able to deliver in the quarter.

Our market managers continued to play a key leadership role during the quarter. In particular, in helping their stores hire and train associates and driving outstanding overall results in both very mature and less established markets.

We also launched a senior assistant store manager position during the first quarter. A select number of assistant store managers who completed all requisite training programs and also distinguished in sales from their peers became high profile candidates for store manager opportunities with some of them already obtaining a store manager position during the quarter.

Our efforts to continue driving strong growth with our pro customers, including direct marketing, store hosted events, and pro specific product assortment improvements again yielded strong results in the first quarter. Sales growth with pro customers strongly outpaced overall growth leading to a meaningful increase in our pro mix during Q1.

These was accomplished with both strong new account growth as well as growth with established pro customers. Consistent with overall results, the strength with pros was broad based even in mature markets that already have a very significant mix of pro business.

Strong sales growth during the quarter occurred across all major product categories with particular strength in stone products, all varieties of subway tiles, and faux wood. We continue to bring many new products into our assortment and these product offerings elicited strong response from our customers.

We are very pleased with our ability to continually bring in new and on-trend products while strongly managing overall inventories and maintaining the overall number of unique SKUs in our assortment. Finally, thus far we have opened two new stores in the chain.

One in Buford, Georgia, bringing our presence in the Atlanta market to three stores, and we also opened our sixth Philadelphia area location last week in Deptford, New Jersey. These stores were 15,000 and 16,000 square feet respectively, as we continue to target store sizes in the low to mid-teens.

Our plans to open nine to 12 total store openings in 2016 remain unchanged, and we continue to target 8% to 12% unit growth over the next several years. Our 2016 openings will be primarily focused in markets where we already compete, where we will leverage economies of scale in marketing, distribution, and store talent.

Similar to last year, we expect more than half of our openings will occur in the second half of the year. We are very excited about our start to 2016.

We continue to make significant progress with all of our focus areas and believe many additional enhancements to our strong business model are still in front of us. We look forward to the remainder of 2016 and taking another step on our journey of becoming the nation's leading specialty tile retailer.

And with that, let me now turn the call over to Kirk for further discussion on the quarter and our updated outlook for 2016.

Thanks, Chris. Today we reported net sales of $84.7 million for the first quarter of 2016, which represents an increase of $11.7 million or 16.1% over sales of $73 million in the same quarter of last year.

Comparable store sales growth was 13.2% in the quarter, which represented a third straight quarter of approximately 10% or greater comparable store sales growth. All vintage classes outperformed our expectations in the quarter with mature stores having the greatest contribution to the sequential increase in total comparable store sales growth that occurred during the quarter.

Our 2013 and 2014 classes of stores continued to deliver very strong growth during the quarter. Gross profit increased $8.7 million in the first quarter or 17.1% over last year.

Gross margin of 70.5% represented an increase of approximately 60 basis points from Q1 of last year. The strong gross margin performance during the quarter was driven primarily by our continued efforts in two key areas, strong collection of revenue at our stores for customer deliveries and reducing the levels of damaged product and shrink.

Our selling, general, and administrative costs for the quarter were $47.9 million as compared to $43.8 million in the first quarter of last year. First quarter 2016 SG&A included approximately $0.7 million special charges related to litigation expense.

Variable compensation, benefit cost and shipping and transportation expenses were the key drivers of SG&A growth in the quarter, driven primarily by growth in sales and employee headcount as well as continued investments to reduce turnover and drive retail talent development. We concluded the first quarter with 115 stores, a 6% increase versus the conclusion of last year's first quarter when our store count was 109.

Depreciation and amortization, rents, property taxes, utilities and other occupancy costs primarily related to store growth represented approximately $0.6 million of SG&A growth versus the prior year during the quarter. Preopening expenses were approximately $200,000 in the quarter.

Adjusted EBITDA was $19.3 million in the first quarter representing growth of 31% versus the prior year period. Adjusted EBITDA margin was 22.8%, an increase of 260 basis points versus the prior year driven by enhanced operating leverage from sales growth of 16.1%, while SG&A costs grew 9.5%, as well as a gross margin rate increase of 60 basis points.

The non-GAAP net income presentation in the earnings release adjusts our GAAP quarterly results by eliminating special charges and then applies the tax rate to the result. This presentation results in non-GAAP net income for the quarter of approximately $77.2 million, growth of 82% versus the prior year period.

The current year non-GAAP net income translates into a basic and fully diluted Q1 earnings per share of $.14, a growth of 75% versus Q1 of last year. Turning to our balance sheet as of March 31.

We ended the quarter with $16.4 million of cash and $41 million of long-term debt. We paid down $15 million of debt during the quarter with free cash flow generation of approximately $21 million in the first quarter.

We were once again pleased with our quarter end inventory of $64.2 million which represented 1% of growth from last year during the quarter with 16.1% sales growth and six more stores than the prior year period. Capital expenditures were approximately $6.4 million in the quarter, primarily related to store IT investments, new store openings and store remodel and merchandising activity.

As detailed in our earnings release this morning, we are providing updated expectations for the full-year based on where we are through the conclusion of the first quarter and our current outlook for the remainder of the year. As Chris discussed, we continue to make a number of operational improvements that we believe are significantly contributing to the growth and increased profitability of our business, including our strategic focus on talent, pro customers and store unit growth.

At the same time we are several quarters into continued year-over-year growth in existing home sales and home price appreciation. I will highlight the key items that were updated this morning from our guidance provided in February.

First, from a top line perspective our full-year sales expectation has increased from $312 million to $325 million to $320 million to $329 million and our outlook for comparable store sales growth has increased from low to mid-single digits to mid to high single digits. Our gross margin expectation has changed from 69% to 70% to approximately 70%.

From a bottom line perspective, we now expect non-GAAP earnings per share of $.40 to $.45 versus previous guidance of $.37 to $.43 and we now expect adjusted EBITDA of $65 million to $69 million versus previous guidance of $62 million to $68 million. With that, operator, we can now turn the call over for questions.

I wanted to -- obviously exceptional quarter, congratulations on the execution. I am curious, to what extent can you tell if whether favorable weather played much of a role in terms of tailwinds in the quarter.

Is there any way to sort of delineate that and then I had one quick follow-up.

Dan, good morning. This is Kirk.

I would say that weather didn’t play a big part. I think obviously our business was strong, and with late winter and spring weather in various markets, you always get a little storm here or there, but I would say for the most part no, weather didn’t play a big impact on our business trend.

That’s helpful. And as I look out a little bit longer term, given the strides you have made in terms of employee retention, management training, as you alluded to in the prepared remarks.

Over the next two to three years, maybe just talk about or update us on what are the primary governors or bandwidth constraints that you are thinking about to your accelerating growth in new store openings beyond the current horizon.

Hi, Dan, this is Chris. I think when you look at our business, I think we are certainly a people-driven organization.

We view people obviously as the core component that makes our company a great company. And so, I think as we continue to recruit and train and retain individuals at the sales associate level, at the assistant manager level, and certainly at the manager level in conjunction with our operation scheme at our DCs and logistics teams, we feel that the areas that we are most focused on, we feel that the level of customer service that we want to deliver to our customers across the country separates us from others in the marketplace and will continue to be a big focus for us as we go not only in for 2016 but certainly for the years beyond as well.

Very helpful. And just lastly, you are generating more cash than you probably can use at this stage, at least based on your current guidance in terms of new store growth.

Just talk about, have you started to think about alternative uses of capital, particularly if we turn to net cash on the balance sheet over the next, call it three, four, five quarters.

Yes, Dan. As we said on previous calls, we continue to discuss what we would like to do with excess cash and our plans, but for the foreseeable future we will continue to focus on paying down debt.

And really if all goes well, we won't be at a zero debt position until likely sometime in late 2017. Our cost of capital is optimized when our leverage ratio is right between at two and three and even when factoring in lease-adjusted debt, even when we pay down debt to zero, we are still in that two to three range.

So we feel pretty good. We don’t have any concerns in the near term about our -- that trend.

But we continue to talk about it.

I wanted to talk about the pro spend. You mentioned that there is a mix shift to pro.

Last year you saw about a 300 basis point mix shift. Has that trend generally continued or accelerated or could you put some quantification around that for what you saw in Q1?

Good morning, Peter. I would say that our pro growth in our pro mix continues to trend very well.

We continue to see very strong growth. We continue to optimize some of the things that we did last year, some of the learnings we had beginning in Q1 and then really throughout the year.

And I think we are getting smarter and smarter about how to attract pros but also retain them as well and continue to earn their business.

Okay. All right.

And are you continuing to see healthy growth in new pro account signups, and I was wondering if you might be able to share any metrics around the average number of visits or purchases a pro makes per month.

Yes. I would say that both in terms of new account growth and some of the other metrics that go along with that, we continue to see that trending up.

We also appear to be retaining the pros that we’ve signed up, as well. So we are pleased to report that.

I am sorry, what was the latter part of your question there?

Well, I am presuming that pros would visit more frequently than a DIY customer. So I am wondering if you have any metrics around how many times an average pro makes purchase per month or per quarter.

Yes. I don’t have anything specific to share on frequency at this point, Peter, but that is something that we believe is true.

Our best pro customers are typically visiting our store at least once per month, sometimes more than that. So we do believe that’s opportunity for sure.

Okay. Thanks.

Shifting gears to the overall comp. Kirk, you had mentioned that the primary driver to the comp was, think you said from the mature stores.

Is that a different dynamic than what you saw in 2015 which was maybe a little bit from the newer store maturity curve dynamic?

We are certainly really pleased with our mature store performance in this quarter. And it's absolutely correct that the uptick in sequential comp from roughly a ten comp in both Q3 and Q4 to the slightly over 13 comp we saw in Q1 of 2016, was really driven by enhanced comp from our mature stores.

So we were pretty pleased in the back half of last year and saw some pretty good solid growth from our mature stores. And that’s continued and actually strengthened a little bit as we have headed into 2016.

Okay. And then lastly from me, on that same note.

You had mentioned the '13 and '14 classes of stores were still strong but no quantification which you had given last year. Can you give us some numbers around how those performed?

They continue to perform very well. As we said, those stores along with pretty much all of the other classes of stores exceeded our expectations in the quarter.

And at this point, we are really at a point where both the 2013 stores are a lot -- they are a lot closer to normal, what we would consider normal performance. I would say that 2014 stores are still a little bit under where we want them to be at this point in their maturity but because we are getting back closer to normalized performance for both of those groups, we are not planning to specifically carve those out going forward.

Okay. Fair enough.

But these were very strong in the quarter so very pleased overall with the performance.

The numbers obviously speak for themselves, so kind of a little bit of a higher level. Chris, is your sense, as you look through the data you see on a daily basis in this quarter, etcetera, is your sense that the underlying trend in the industry whether you want to define that as flooring or tile, however you want to look at it, is very good or -- and you are just doing that much better?

Or do you think it's sort of average and you are just really doing a lot better than the competition? I'm trying to get a sense of how you are doing on a relative basis from what you see.

Hi, Reed, good morning. Thanks for the question.

I think when we looked in our business across the country, there is no question, as Kirk and I have both stated in our opening remarks that business across every geography and every vintage of store has been exceptionally strong in the quarter. When we look at that in comparison to existing home sales as well as median existing home pricing, it's a bit more choppy.

So we saw a deceleration in '15. In Q4 of 2015 we saw a 2.3%, on an average of a 6.3% in for the full year.

January saw an uptick of 11% year-over-year. February saw only 2% and we will see what the March number yields here as well.

So I think it's a bit choppy on in the marketplace from a macro standpoint. I think there is -- if you look at the Census Bureau data pertaining to remodeling, it continues to be strong.

But I do feel that our business across the industry has been stronger yet. And I do feel that we have taken share from competitors in the marketplace and certainly in the geographies that we have competed in the 31 states that we are marketing right now.

That makes sense. So if I'm sitting in your chair, I would infer then if you are doing as well as you are given the inconsistency you are seeing, you've got to feel pretty good about what you're seeing over the next few quarters, it sounds like?

Very pleased on, certainly our performance in the quarter and I would say certainly with our implied guidance for the remainder of the year that we are certainly expecting this momentum to continue for the duration of the 2016.

That's great. And then just one follow up, kind of related to merchandising.

You've talked about this in the past. You mentioned in the prepared remarks about how from an assortment standpoint now you've really taken great care to broaden it.

So you've brought in more, call it, opening price points as well as the premium exposure. And my question I guess is around, as you look at the impact of that, do you see that playing out in any way, shape or form in terms of the, for example, the opening price points are bringing in more entry level buyers?

Or is it really just making you a better part of the -- a more bigger part of the conversation initially. So people see you now with those price points, they come in and they probably still buy what you would have had before they just wouldn't have looked at you initially.

Kind of a convoluted question but I think you know where I'm going with this.

Yes, I do Reed. I will look at our assortment as being very complete across every product category and now every price point.

I think in the past we were fairly concentrated in the, what I will call middle price points where the -- what I will call the better price points type SKUs. We brought in some opening price points to complement and to showcase the value of our mid-priced items.

And then I think we have been, in particular, very pleased with our premium SKUs as well. Certainly, I think certainly when we look at what we are classifying as premium price SKUs in relation to other competitors in the marketplace that sell almost exclusively high-end goods, the value that we provide to that customer and the value of the product, is substantial and significant.

So when I look at providing, we look at this as, when you do the product assortment correctly, it's another great tool that sales associates really have prepared tips to have something for everyone. I look at the combination of having a good, better, best scenario across all the different price points as well as price of very significant product categories as a natural evolution of us as a business and also as we think more and more about our business in a multi-channel environment which is we think very important for our business long term.

No, that's great. It's obviously complementing what you are doing in pro as well so, good.

I'll leave it there and let someone else jump in. Best of luck, guys.

My first question is around kind of expenses and EBITDA margin. The $4.1 million in SG&A growth that you saw this year, first quarter over first quarter.

Can you help us understand, how much of that was new store related versus the variable component that was related to the revenue?

Good morning, Peter. This is Kirk.

A lot of it was really variable. You know when you see the kind of revenue growth that we are pleased to see, a lot of that expense obviously is going to be variable.

And there is a little bit that’s new store related. That really shows up in occupancy as well.

But I would say overall, we were very pleased with our flow-through from revenue in a proper perspective.

Yes. No, Kirk, that's helpful.

And that leads me to my next question, which was around the flow-through, I mean the adjusted EBITDA flow-through margins. Another solid quarter of roughly 40%.

That's kind of third quarter in a row you've been at that level. You've been comping double digits effectively here.

How do we think about that margin flow-through over the balance of the year? If comps were to get back towards the mid-single digits which it seems that your guidance implies, how do we think about that flow-through?

Is there a reason why that margin would maybe dip? Would it hold at 40%?

How should we think about that?

Sure, Peter, yes. So if you look at just our mature stores as a group or just the existing stores as a group.

And you look at our flow- through for the quarter and really pretty much any given quarter, we always feel good that we should be in that 50% to 55% range. And when we have store openings that are again this year a little bit more back half weighted, and there is a little hitch of seasonality in our business as well, that does impact the flow-through a little bit.

And you can see that impact in the back half. But overall, if we were in a no growth mode, that flow through is pretty strong.

And we continue to feel good about that 50%ish flow-through.

Okay. That's helpful.

And then just pivoting over to gross margin a little bit. The two drivers, the collection and the delivery revenue and the shrink.

Help us frame the gains that you guys have made so far on those and how much further you can go with each.

Well, we like the trends. We are now about three quarters in on the customer delivery impact and also now have a couple of quarters under our belt.

Seen some good improvement in controlling damaged product as well as shrink. And I think a lot of it is, it's pretty simple.

I mean it just inspects what you expect. We are setting specific targets for the business in total.

Also at a location level. And we are aligning incentives around those targets.

And it's really, it's a whole team effort. It's not just people hearing the corporate office, certainly it's driven by the stores.

And so we have eyes on these metrics at the store level. As we have mentioned in the past, we are score-carding it.

And also in the DCs there is a very focused effort. So we like the trend that we have established and we are going to continue to try to execute it and keep that trend going.

Okay, great. Sounds like there is more to go there.

My last question is just around inventory. Very good control, I know, Chris, you had pointed out in your comments.

When should we expect inventory to start growing at a more material pace? Or is it something that you can continue to hold kind of flattish to only up modestly over the next, call it for the balance of the year?

Thank you.

Well, Peter, this is Chris. Thanks for the comment on the inventory.

It's certainly been a big focus since my time at the organization. I think for us it's always finding that right balance between having the right amount of goods available to our stores and our customers to sell and also making sure that we are making the right decisions on the assortment process.

So I think they will be up modestly, increases in that inventory as we go forward, but certainly measured. And I would look that as we continue to add additional SKUs on the pro side as well as complementing and augmenting our assortments across multiple different categories which we feel have been a great benefit for our stores and for our overall results of bringing some of these new on trend items into our assortments.

And the sell-through on these has been terrific. I think we could have even led a bit deeper in the first quarter and certainly we will make some modifications to our buy patterns on as well.

So you might see some slight upticks in it but they will certainly be a core focus for the organization and me in particular as we go into the out quarters in the year.

I've got two questions, I guess. One, I know you don't guide free cash flow, but you had a terrific first quarter.

So maybe you could just comment on how, if at all, that outlook for the number maybe changes for the year. And then, secondly, just on the product gross margin, it sounds like you are bar-belling a little with better higher end stuff and better low end stuff in the lineup.

And I guess are those sort of offsetting each other to be gross margin neutral? Thank you.

Percentage gross margin neutral.

Good morning, John. This is Chris.

I will pick the second half of your question. I will let Kirk answer the first.

On the product assortment pertaining to gross margin rate, I wouldn’t necessarily look at it in the way that you depicted, I would look at it more from a standpoint that the gross margin rate on the products across the board is relatively equal. It's not when typically other retailers in other categories look at those opening price point as significantly below their blended rate of the company, that’s not the case at the Tile Shop.

I feel very confident in our ability to continue to source opening price point items across the globe. And then conversely, on the best items in the SKU, the upper echelon price points, I fell that quite frankly, having at our blended rate as the company has the ability to provide this tremendous value and a significance of value that’s very apparent to that customer that’s looking for something very high end to his or her home.

So I would look at, as I said, I would look at them as or equalize, then maybe you see at other firms. Kirk?

Good morning, John. This is Kirk.

I will take the cash flow question. We continue to be very pleased with the amount of cash that we have been able to generate.

Last year we ended the year roughly at $40 million, free cash flow. This year we anticipate it being a little bit less than that just because we are slightly ramping up store growth.

So we expect CapEx to be a little bit higher than last year. And we had some good -- we are annualizing some pretty good working capital improvements that we made last year, including controlling inventory and a few other things.

So certainly not expecting to generate, at least for the balance of the year, we weren't expecting to generate in that $40 million neighborhood. And we will tell you that we were pretty significantly higher in Q1 than we anticipated in terms of generating cash.

Ended up at around $20 million of free cash flow and we were really expecting roughly half of that. So we were very happy to see that.

We will see as we continue to move through the year, if we are able to continue and certainly our focus is going to continue to be on inventory and other things and also continuing to generate a strong business trend. So hopefully that will continue.

I wanted to ask, for a little more color on -- you mentioned kind of with the new products coming in. Beyond opening price, say, was there any new trends that are coming in that you can talk to that you see like that are going to start shaping the path for the future or is it just subtle shifts?

Was it just different sized tiles of the same stone or something?

Good morning, Joe. This is Chris.

The only items that we really called out in my prepared remarks was -- and we really, when we look at trends across the board, I highlighted three in particular. One was, stone continues to be a bigger part of our mix.

I am very pleased with our assortment on natural stone, marble in particular. And within marble, white and grey marble is red hot and it continues to be one of our biggest SKU drivers across the board.

Certainly, in subway tiles of all shapes and sizes, we feel that we have a wide variety of subway tiles and certainly the classic 3x6, but having multiple different dimensions of that. And also coming in a bit more, we have a mirrored antique glass subway tile in, which is proving to be exceptionally on trend.

It's been picked up in several design magazines. So I would expect that to continue as well.

And then faux wood, which we talked about certainly in the past, continues to be an excellent replacement to hardwood flooring. I view it as a very worthy competitor for anyone that’s looking for a hard surface and having that authentic wood look into their home that has many advantages, including price, over natural hardwood surfaces.

So those three in particular I would call in here for you on the call. But in general across the board, it's a lot of categories had pretty outsize success within the quarter.

Got it. And with these trends, because they do seem like they are some kind of deeper underlying trends that will be here for a little while.

I mean, is there any need to upgrade or change out some of the vignettes in the showrooms or in the cost to do that, or...?

Well, we look at all the vignettes. I mean all the vignettes within the store have and we look at on a quarterly basis.

We do have re-modeling already built into our CapEx. A number that we provide to all those in the investment community.

We don’t view that significantly changing. We feel that and we have anticipated many of these trends as well.

And I think all the stores that we certainly built, all three of those categories, have outsized proportions of vignettes that showcase these products. And then I think the other thing as well, with the investments that we have made on the Internet and then also having every price point -- excuse me, every price tag in the store now having a QR code that the customer is able to scan as well as the employee, to look at how that particular tile is installed in a bathroom or kitchen or a backsplash, is proving to be very powerful for the customer as they visualize in their home.

That they can see how it's depicted not only just a physical vignette but also a virtual vignette which we think is a big part of what we want to stand for as part of having our rich media come through in a way that allows a customer to really visualize and see it in their own home about a particular tile that they might be considering to install somewhere in their home.

Thanks for joining us. Have a great day.